The news: Block-owned Cash App can now finance its Cash App Borrow loans directly to consumers through Square Financial Services, per a press release.

The FDIC approval means Block no longer has to rely on Utah-based First Electronic Bank to originate and issue loans.

How we got here: Block’s focus for the last year has been what it calls “banking our base.” CEO Jack Dorsey wants to turn the 54.9 million people we forecast will use Cash App this year into users who take advantage of Block’s full suite of consumer banking products.

• Cash App offers direct deposit, a debit card, a high-yield savings account, and two lending products: the buy now, pay later (BNPL) service Afterpay and Borrow.
• Dorsey wants to ramp up its offering with wire transfers, check deposits, and bill pay, per Block’s Q3 2023 shareholder letter.

Cash App started piloting Borrow in 2020. The service lets consumers borrow up to $200 a month for a flat fee of about 5%. Bringing the service in-house will give Block more control over who is offered and approved for Borrow loans—as well as more of the revenues.

• Cash App Borrow originated almost $9 billion in loans in 2024, per Block’s Q4 2024 earnings.
• That’s already helped drive Cash App’s gross profit up 16% YoY.

Our take: Block has so far focused on small-dollar, short term lending, billing Borrow as an alternative to usurious payday lending. Bringing this service in-house could open the door to larger lending operations—which will be critical if Block really wants to be a “bank*.”

Right now, Cash App’s user base skews younger and lower income, but it wants to be a “top” financial services provider for households making $150,000 or more a year. That’s not going to happen through $200 short-term loans.

• Middle- and upper-income households are going to need more sophisticated, longer-term lending solutions like personal loans.
• Block also needs to quash allegations of fraud and money laundering before it can broaden its appeal. (Tripling Cash App’s marketing spend could be the first step toward resolving that.)